Record Revenues of $87.4 million and GAAP
Net Income of $4.3 million
Grid Dynamics Holdings, Inc. (Nasdaq: GDYN) (“Grid Dynamics” or
the “Company”), a leader in enterprise-level digital
transformation, today announced results for the third quarter ended
September 30, 2024.
We are very pleased to report third quarter 2024 revenues of
$87.4 million that was higher than our outlook range of $84.0
million to $86.0 million that we provided in August 2024. Our
Retail and Technology, Media and Telecom (“TMT”) verticals were the
two largest verticals during the third quarter of 2024 with 34.1%
and 27.7% of our revenues, respectively. Our Finance vertical,
representing 16.2% of our third quarter revenues, grew 12.7% on a
sequential basis and 94.0% on a year-over-year basis. Strength in
the Financial vertical came from our finance technology and
insurance customers. Our CPG and Manufacturing vertical,
representing 11.2% of our third quarter revenues, remained flat on
a sequential basis.
“The third quarter was another milestone in the Company’s
history. We reported record revenues and profitability, scaled
partnership influenced revenues, and set a new record with the
highest number of billable engineers. Customers, both existing and
new, are contributing to our strong results, which is a testament
to our technology differentiation and delivery excellence. The
strong demand we witnessed in the third quarter was built on steady
improvements in the first half of the year.
I am thrilled to welcome JUXT and Mobile Computing to Grid
Dynamics. Each company brings in a unique set of capabilities.
UK-based JUXT elevates our industry expertise in banking and
financial services, and Argentina-based Mobile Computing enhances
our engineering capabilities and adds premier clients in Latin
America.
Our AI initiatives continue to gain significant traction across
our customer base. Our pipeline of AI opportunities has grown to
more than 100, representing a 50% increase from last quarter. This
growth reflects the increasing enterprise readiness to move beyond
experimentation to implementation of AI solutions at scale.
We approach the end of 2024 with strong business momentum and
confident of the foundations of the Company as we enter 2025,” said
Leonard Livschitz, CEO.
Third Quarter of 2024 Financial
Highlights
- Total revenues were $87.4 million, an increase of 5.3% on a
sequential basis and 12.9% on a year-over-year basis.
- GAAP gross profit was $32.7 million, or 37.4% of revenues, in
the third quarter of 2024, compared to $28.2 million, or 36.4% of
revenues, in the third quarter of 2023. Non-GAAP gross profit was
$33.3 million, or 38.0% of revenues, in the third quarter of 2024,
compared to $28.7 million, or 37.0% of revenues, in the third
quarter of 2023.
- GAAP net income attributable to common stockholders was $4.3
million, or $0.05 per share, based on 78.8 million diluted
weighted-average common shares outstanding in the third quarter of
2024, compared to $0.7 million, or $0.01 per share, based on 77.3
million diluted weighted-average common shares outstanding in the
third quarter of 2023. Non-GAAP net income was $8.1 million, or
$0.10 per diluted share, based on 78.8 million diluted
weighted-average common shares outstanding in the third quarter of
2024, compared to $5.9 million, or $0.08 per diluted share, based
on 77.3 million diluted weighted-average common shares outstanding
in the third quarter of 2023.
- Non-GAAP EBITDA (earnings before interest, taxes, depreciation,
amortization, other income and expenses, fair value adjustments,
stock-based compensation, transaction and transformation-related
costs, restructuring costs as well as geographic reorganization
expenses), a non-GAAP metric, was $14.8 million in the third
quarter of 2024 compared to $10.7 million in the third quarter of
2023.
See “Non-GAAP Financial Measures” and “Reconciliation of
Non-GAAP Information” below for a discussion of our non-GAAP
measures.
Cash Flow and Other
Metrics
- Cash provided by operating activities was $23.1 million for the
nine months ended September 30, 2024, compared to $33.5 million for
the nine months ended September 30, 2023.
- Cash and cash equivalents totaled $231.3 million as of
September 30, 2024, compared to $257.2 million as of December 31,
2023.
- Total headcount was 4,298 as of September 30, 2024, compared
with 3,823 employees as of September 30, 2023.
Financial Outlook
- The Company expects revenue in the fourth quarter of 2024 to be
in the range of $95.0 million to $97.0 million.
- Non-GAAP EBITDA in the fourth quarter of 2024 is expected to be
between $13.5 million and $15.5 million.
- For the fourth quarter of 2024, we expect our basic share count
to be in the 77.0 - 78.0 million range and diluted share count to
be in the 80.0 - 81.0 million range.
Grid Dynamics is not able, at this time, to provide GAAP targets
for net income/(loss) for the fourth quarter of 2024 because of the
difficulty of estimating certain items excluded from Non-GAAP
EBITDA that cannot be reasonably predicted, such as interest
income, taxes, other income/(expenses), fair-value adjustments,
geographic reorganization expenses, restructuring expenses,
transaction-related costs and charges related to stock-based
compensation expense. The effect of these excluded items may be
significant.
Conference Call and
Webcast
Grid Dynamics will host a video conference call at 4:30 p.m. ET
on Thursday, October 31, 2024 to discuss its third quarter
financial results. Investors and other interested parties can
access the call in the following ways: A webcast of the video
conference call can be accessed on the Investor Relations section
of the Company’s website at https://ir.griddynamics.com/.
A replay will also be available after the call at
https://ir.griddynamics.com/ with the passcode $Q3@2024.
About Grid Dynamics
Grid Dynamics (Nasdaq: GDYN) is a digital-native technology
services provider that accelerates growth and bolsters competitive
advantage for Fortune 1000 companies. Grid Dynamics provides a
range of digital transformation consulting and implementation
services that includes artificial intelligence, big data,
analytics, search, cloud and DevOps. Grid Dynamics achieves high
speed-to-market, quality, and efficiency by using technology
accelerators, an agile delivery culture, and its pool of global
engineering talent. Founded in 2006, Grid Dynamics is headquartered
in Silicon Valley with offices across the globe, including the
U.S., Europe, the U.K., India, Mexico, Jamaica and Argentina.
To learn more about Grid Dynamics, please visit
www.griddynamics.com. Follow us on LinkedIn.
Non-GAAP Financial
Measures
To supplement the financial measures presented in Grid Dynamics
press release in accordance with generally accepted accounting
principles in the United States (“GAAP”), the Company also presents
Non-GAAP measures of financial performance.
A “non-GAAP financial measure” refers to a numerical measure of
Grid Dynamics historical or future financial performance or
financial position that is included in (or excluded from) the most
directly comparable measure calculated and presented in accordance
with GAAP. Grid Dynamics provides certain non-GAAP measures as
additional information relating to its operating results as a
complement to results provided in accordance with GAAP. The
non-GAAP financial information presented herein should be
considered in conjunction with, and not as a substitute for or
superior to, the financial information presented in accordance with
GAAP and should not be considered a measure of liquidity and
profitability.
Grid Dynamics has included these non-GAAP financial measures
because they are financial measures used by Grid Dynamics’
management to evaluate Grid Dynamics’ core operating performance
and trends, to make strategic decisions regarding the allocation of
capital and new investments and are among the factors analyzed in
making performance-based compensation decisions for key
personnel.
Grid Dynamics believes the use of non-GAAP financial measures,
as a supplement to GAAP measures, is useful to investors in that
they eliminate items that are either not part of core operations or
do not require a cash outlay, such as stock-based compensation
expense. Grid Dynamics believes these non-GAAP measures provide
investors and other users of its financial information consistency
and comparability with its past financial performance and
facilitate period to period comparisons of operations. Grid
Dynamics believes these non-GAAP measures are useful in evaluating
its operating performance compared to that of other companies in
its industry, as they generally eliminate the effects of certain
items that may vary for different companies for reasons unrelated
to overall operating performance.
There are significant limitations associated with the use of
non-GAAP financial measures. Further, these measures may differ
from the non-GAAP information, even where similarly titled, used by
other companies and therefore should not be used to compare our
performance to that of other companies. Grid Dynamics compensates
for these limitations by providing investors and other users of its
financial information a reconciliation of non-GAAP measures to the
related GAAP financial measures. Grid Dynamics encourages investors
and others to review its financial information in its entirety, not
to rely on any single financial measure, and to view its non-GAAP
measures in conjunction with GAAP financial measures. Please see
the reconciliation of non-GAAP financial measures to the most
directly comparable GAAP measures attached to this release.
Forward-Looking
Statements
This communication contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 that are not
historical facts, and involve risks and uncertainties that could
cause actual results of Grid Dynamics to differ materially from
those expected and projected. These forward-looking statements can
be identified by the use of forward-looking terminology, including
the words “believes,” “estimates,” “anticipates,” “expects,”
“intends,” “plans,” “may,” “will,” “potential,” “projects,”
“predicts,” “continue,” or “should,” or, in each case, their
negative or other variations or comparable terminology. These
forward-looking statements include, without limitation, the
quotations of management, the section titled “Financial Outlook,”
and statements concerning Grid Dynamics’s expectations with respect
to future performance, particularly in light of the macroeconomic
environment and the Russian invasion of Ukraine, as well as its
GigaCube strategy.
These forward-looking statements involve significant risks and
uncertainties that could cause the actual results to differ
materially from the expected results. Most of these factors are
outside Grid Dynamics’s control and are difficult to predict.
Factors that may cause such differences include, but are not
limited to: (i) Grid Dynamics has a relatively short operating
history and operates in a rapidly evolving industry, which makes it
difficult to evaluate future prospects and may increase the risk
that it will not continue to be successful and may adversely impact
our stock price; (ii) Grid Dynamics may be unable to effectively
manage its growth or achieve anticipated growth, particularly as it
expands into new geographies, which could place significant strain
on Grid Dynamics’ management personnel, systems and resources;
(iii) Grid Dynamics’ revenues are highly dependent on a limited
number of clients and industries that are affected by seasonal
trends, and any decrease in demand for outsourced services in these
industries may reduce Grid Dynamics’ revenues and adversely affect
Grid Dynamics’ business, financial condition and results of
operations; (iv) macroeconomic conditions, inflationary pressures,
and the geopolitical climate, including the Russian invasion of
Ukraine, have and may continue to materially adversely affect our
stock price, business operations, overall financial performance and
growth prospects; (v) Grid Dynamics’ revenues are highly dependent
on clients primarily located in the United States, and any economic
downturn in the United States or in other parts of the world,
including Europe or disruptions in the credit markets may have a
material adverse effect on Grid Dynamics’ business, financial
condition and results of operations; (vi) Grid Dynamics faces
intense and increasing competition; (vii) Grid Dynamics’ failure to
successfully attract, hire, develop, motivate and retain highly
skilled personnel could materially adversely affect Grid Dynamics’
business, financial condition and results of operations; (viii)
failure to adapt to rapidly changing technologies, methodologies
and evolving industry standards may have a material adverse effect
on Grid Dynamics’ business, financial condition and results of
operations; (ix) failure to successfully deliver contracted
services or causing disruptions to clients’ businesses may have a
material adverse effect on Grid Dynamics’ reputation, business,
financial condition and results of operations; (x) risks and costs
related to acquiring and integrating other companies; and (xi)
other risks and uncertainties indicated in Grid Dynamics filings
with the SEC.
Grid Dynamics cautions that the foregoing list of factors is not
exclusive. Grid Dynamics cautions readers not to place undue
reliance upon any forward-looking statements, which speak only as
of the date made. Grid Dynamics does not undertake or accept any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements to reflect any change
in its expectations or any change in events, conditions or
circumstances on which any such statement is based. Further
information about factors that could materially affect Grid
Dynamics, including its results of operations and financial
condition, is set forth under the “Risk Factors” section of the
Company’s quarterly report on Form 10-Q filed October 31, 2024 and
in other periodic filings Grid Dynamics makes with the SEC.
Schedule 1:
GRID DYNAMICS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME/(LOSS) AND
COMPREHENSIVE
INCOME/(LOSS)
Unaudited
(In thousands, except per
share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Revenues
$
87,435
$
77,419
$
250,289
$
234,841
Cost of revenues
54,706
49,267
160,332
149,809
Gross profit
32,729
28,152
89,957
85,032
Operating expenses
Engineering, research, and development
4,446
3,402
12,945
10,878
Sales and marketing
6,817
6,132
21,395
17,729
General and administrative
19,330
18,475
58,983
60,940
Total operating expenses
30,593
28,009
93,323
89,547
Income/(loss) from operations
2,136
143
(3,366
)
(4,515
)
Other income/(expense), net
3,466
3,159
8,656
7,849
Income before income taxes
5,602
3,302
5,290
3,334
Provision for income taxes
1,320
2,626
5,773
8,001
Net income/(loss)
$
4,282
$
676
$
(483
)
$
(4,667
)
Foreign currency translation
adjustments
214
(561
)
(91
)
1,337
Comprehensive income/(loss)
$
4,496
$
115
$
(574
)
$
(3,330
)
Income/(loss) per share
Basic
$
0.06
$
0.01
$
(0.01
)
$
(0.06
)
Diluted
$
0.05
$
0.01
$
(0.01
)
$
(0.06
)
Weighted average shares
outstanding
Basic
76,697
75,464
76,485
75,026
Diluted
78,837
77,339
76,485
75,026
Schedule 2:
GRID DYNAMICS HOLDINGS,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
Unaudited
(In thousands, except share
and per share data)
As of
September 30,
2024
December 31,
2023
Assets
Current assets
Cash and cash equivalents
$
231,261
$
257,227
Accounts receivable, net of allowance of
$1,791 and $1,363 as of September 30, 2024 and December 31, 2023,
respectively
64,320
49,824
Unbilled receivables
5,737
3,735
Prepaid income taxes
10,292
3,998
Prepaid expenses and other current
assets
11,385
9,196
Total current assets
322,995
323,980
Property and equipment, net
13,965
11,358
Operating lease right-of-use assets,
net
12,329
10,446
Intangible assets, net
42,451
26,546
Goodwill
73,875
53,868
Deferred tax assets
7,515
6,418
Other noncurrent assets
4,122
2,549
Total assets
$
477,252
$
435,165
Liabilities and equity
Current liabilities
Accounts payable
$
3,717
$
3,621
Accrued compensation and benefits
22,986
19,263
Accrued income taxes
13,191
8,828
Operating lease liabilities, current
5,179
4,235
Accrued expenses and other current
liabilities
9,161
6,276
Total current liabilities
54,234
42,223
Deferred tax liabilities
7,621
3,274
Operating lease liabilities,
noncurrent
7,649
6,761
Contingent consideration payable,
noncurrent
7,501
—
Total liabilities
$
77,005
$
52,258
Stockholders’ equity
Common stock, $0.0001 par value;
110,000,000 shares authorized; 76,742,933 and 75,887,475 issued and
outstanding as of September 30, 2024 and December 31, 2023,
respectively
$
8
$
8
Additional paid-in capital
415,425
397,511
Accumulated deficit
(16,369
)
(15,886
)
Accumulated other comprehensive income
1,183
1,274
Total stockholders’ equity
400,247
382,907
Total liabilities and stockholders’
equity
$
477,252
$
435,165
Schedule 3:
GRID DYNAMICS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
Unaudited
(In thousands)
Nine Months Ended
September 30,
2024
2023
Cash flows from operating
activities
Net loss
$
(483
)
$
(4,667
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
9,579
6,255
Operating lease right-of-use assets
amortization expense
3,301
2,295
Bad debt expense
1,077
674
Deferred income taxes
(1,516
)
(2,451
)
Change in fair value of contingent
consideration
—
(4,220
)
Stock based compensation
25,969
27,677
Other (income)/expenses, net
(890
)
98
Changes in assets and liabilities:
Accounts receivable
(8,649
)
3,085
Unbilled receivables
(1,027
)
(1,509
)
Prepaid income taxes
(5,866
)
(5,295
)
Prepaid expenses and other current
assets
(2,894
)
28
Accounts payable
(740
)
(471
)
Accrued compensation and benefits
3,293
6,554
Operating lease liabilities
(3,352
)
(2,119
)
Accrued income taxes
4,363
5,638
Accrued expenses and other current
liabilities
965
1,965
Net cash provided by operating
activities
23,130
33,537
Cash flows from investing
activities
Purchase of property and equipment
(9,126
)
(5,593
)
Acquisition of business, net of cash
acquired
(32,144
)
(17,830
)
Other investing activities, net
(44
)
—
Net cash used in investing
activities
(41,314
)
(23,423
)
Cash flows from financing
activities
Proceeds from exercises of stock options,
net of shares withheld for taxes
867
491
Payments of tax obligations resulted from
net share settlement of vested stock awards
(8,635
)
(14,958
)
Net cash used in financing
activities
(7,768
)
(14,467
)
Effect of exchange rate changes on cash
and cash equivalents
(14
)
1,337
Net decrease in cash and cash
equivalents
(25,966
)
(3,016
)
Cash and cash equivalents, beginning of
period
257,227
256,729
Cash and cash equivalents, end of
period
$
231,261
$
253,713
Supplemental disclosure of cash flow
information:
Cash paid for income taxes
$
8,993
$
9,936
Supplemental disclosure of non-cash
activities
Acquisition fair value of contingent
consideration issued for acquisition of business
$
7,480
$
932
Schedule 4:
GRID DYNAMICS HOLDINGS,
INC.
RECONCILIATION OF NON-GAAP
INFORMATION
Unaudited
(In thousands, except per
share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Revenues
$
87,435
$
77,419
$
250,289
$
234,841
Cost of revenues
54,706
49,267
160,332
149,809
GAAP gross profit
32,729
28,152
89,957
85,032
Stock-based compensation
525
502
1,517
1,482
Non-GAAP gross profit
$
33,254
$
28,654
$
91,474
$
86,514
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
GAAP net income/(loss)
$
4,282
$
676
$
(483
)
$
(4,667
)
Adjusted for:
Depreciation and amortization
3,424
2,478
9,579
6,255
Provision for income taxes
1,320
2,626
5,773
8,001
Stock-based compensation
7,139
7,267
25,969
27,677
Transaction and transformation-related
costs(1)
1,571
436
2,238
1,519
Geographic reorganization(2)
316
306
1,262
1,528
Restructuring costs(3)
227
103
1,157
1,086
Other (income)/expense, net(4)
(3,466
)
(3,159
)
(8,656
)
(7,849
)
Non-GAAP EBITDA
$
14,813
$
10,733
$
36,839
$
33,550
__________________________
(1)
Transaction and
transformation-related costs include, when applicable, external
deal costs, transaction-related professional fees,
transaction-related retention bonuses, which are allocated
proportionally across cost of revenue, engineering, research and
development, sales and marketing and general and administrative
expenses as well as other transaction-related costs including
integration expenses consisting of outside professional and
consulting services.
(2)
Geographic reorganization
includes expenses connected with military actions of Russia against
Ukraine and the exit plan announced by the Company and includes
travel and relocation-related expenses of employees from the
aforementioned countries, severance payments, allowances as well as
legal and professional fees related to geographic repositioning in
various locations. These expenses are incremental to those expenses
incurred prior to the crisis, clearly separable from normal
operations, and not expected to recur once the crisis has subsided
and operations return to normal.
(3)
We implemented a restructuring
plan during the first quarter of 2023. Our restructuring costs are
comprised of severance charges and respective taxes, and are
included in General and administrative expenses in the Company’s
unaudited condensed consolidated statement of income (loss) and
comprehensive income (loss).
(4)
Other (income)/expense, net
consists primarily of gains and losses on foreign currency
transactions, fair value adjustments, and other miscellaneous
non-operating expenses, potential loss contingencies as well as
other income consisting primarily of interest on cash held at banks
and returns on investments in money-market funds.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
GAAP net income/(loss)
$
4,282
$
676
$
(483
)
$
(4,667
)
Adjusted for:
Stock-based compensation
7,139
7,267
25,969
27,677
Transaction and transformation-related
costs (1)
1,571
436
2,238
1,519
Geographic reorganization (2)
316
306
1,262
1,528
Restructuring costs(3)
227
103
1,157
1,086
Other (income)/expense, net(4)
(3,466
)
(3,159
)
(8,656
)
(7,849
)
Tax impact of non-GAAP adjustments(5)
(1,982
)
232
(2,132
)
86
Non-GAAP net income
$
8,087
$
5,861
$
19,355
$
19,380
Number of shares used in the GAAP diluted
EPS
78,837
77,339
76,485
75,026
GAAP diluted EPS
$
0.05
$
0.01
$
(0.01
)
$
(0.06
)
Number of shares used in the non-GAAP
diluted EPS
78,837
77,339
78,301
77,298
Non-GAAP diluted EPS
$
0.10
$
0.08
$
0.25
$
0.25
__________________________
(1)
Transaction and
transformation-related costs include, when applicable, external
deal costs, transaction-related professional fees,
transaction-related retention bonuses, which are allocated
proportionally across cost of revenue, engineering, research and
development, sales and marketing and general and administrative
expenses as well as other transaction-related costs including
integration expenses consisting of outside professional and
consulting services.
(2)
Geographic reorganization
includes expenses connected with military actions of Russia against
Ukraine and the exit plan announced by the Company and includes
travel and relocation-related expenses of employees from the
aforementioned countries, severance payments, allowances as well as
legal and professional fees related to geographic repositioning in
various locations. These expenses are incremental to those expenses
incurred prior to the crisis, clearly separable from normal
operations, and not expected to recur once the crisis has subsided
and operations return to normal.
(3)
We implemented a restructuring
plan during the first quarter of 2023. Our restructuring costs are
comprised of severance charges and respective taxes, and are
included in General and administrative expenses in the Company’s
unaudited condensed consolidated statement of income (loss) and
comprehensive income (loss).
(4)
Other (income)/expense, net
consists primarily of gains and losses on foreign currency
transactions, fair value adjustments, and other miscellaneous
non-operating expenses, potential loss contingencies as well as
other income consisting primarily of interest on cash held at banks
and returns on investments in money-market funds.
(5)
Reflects the estimated tax impact
of the non-GAAP adjustments presented in the table.
Schedule 5:
GRID DYNAMICS HOLDINGS,
INC.
REVENUE BY VERTICALS
Unaudited
(In thousands, except
percentages)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
(in thousands, except
percentages of revenues)
Retail
$
29,825
34.1 %
$
26,544
34.3 %
$
81,233
32.5 %
$
77,972
33.2 %
Technology, Media and Telecom
24,188
27.7 %
23,732
30.7 %
71,449
28.5 %
74,639
31.8 %
Finance
14,158
16.2 %
7,299
9.4 %
36,967
14.8 %
20,562
8.8 %
CPG/Manufacturing
9,807
11.2 %
9,668
12.5 %
29,209
11.7 %
33,186
14.1 %
Healthcare and Pharma
2,510
2.9 %
3,434
4.4 %
8,677
3.5 %
10,292
4.4 %
Other
6,947
7.9 %
6,742
8.7 %
22,754
9.0 %
18,190
7.7 %
Total
$
87,435
100.0 %
$
77,419
100.0 %
$
250,289
100.0 %
$
234,841
100.0 %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241031031735/en/
Grid Dynamics Investor Relations:
investorrelations@griddynamics.com
Grid Dynamics (NASDAQ:GDYN)
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Grid Dynamics (NASDAQ:GDYN)
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